“Eurex Repo, Eurex Clearing and Clearstream, all part of Deutsche Boerse Group, will introduce an extension of the integrated and innovative GC Pooling market for secured funding which will be made available for active GC Pooling participants (banks) to further strengthen their service scope towards corporate customers. Launch is scheduled for Q4 2012. The leading GC Pooling marketplace for secured interbank transactions will be enhanced to contribute to re-building trust between banks and their existing non-financial customers, e.g. corporates, asset managers and pension funds.”

“A financial product could be constructed with payments linked to a sea-level index, and featuring some characteristics similar to a catastrophe bond or weather derivative. However, as many of these risks will take a number of years for their impact to be felt, the new financial product would need a carefully balanced structure to (i) keep premiums affordable, (ii) provide attractive long-term returns to investors, and (iii) provide a sufficiently secure source of payments in the event of rising sea levels……”

As a former product designer, I geek out on possible new products like this. My guess? No way this is ever purchased ever.

I am glad Brad is tackling this issue with professional jargon attached, but also sad he has do to it at all. I gave a list of reasons monetary policy sucks a while back and Nick R. disagreed with this list.

Looking at Brads reasoning, he basically used economics jargon to say the same things my list said. When I read,

“The first of these requires enormous gross asset swaps in order to free up any noticeable amount of risk-bearing capacity. Moreover, it requires that the monetary authority have the power and the will to commit the taxpayers to backstopping it and bearing substantial amounts of default risk.”

I think about the primary channel of monetary policy, real estate, and try to imagine just what “shift in risk-bearing capacity” would cause people to buy homes. The amount of monentary policy which would cause this shift is so gigantic isn’t not worth considering.

Then, this is a howler: “The principal argument for monetary policy is that, by modifying asset supplies and thus asset prices, it induces households and businesses to boost their spending on things that they almost bought anyway. Thus–for marginal policy shifts, starting out at a first-best optimum, and if the relative distribution of wealth corresponds to social welfare (or if questions of the relative distribution of wealth are left to a more openly political process and walled-off from technocratic macroeconomic questions of stabilization policy)–monetary policy will not push you far away from the free-market optimum.”

hahahahaha! It’s mostly non-distortionary, and monetary policy doesn’t pick winners and losers. Cullen will vouch for the inaccuracy of this idea. I’ll ask a simple question: Why did so many people think they could make fortunes in real estate in the 2000’s?

The recovery is too feeble, and the country needs to invest an additional $1 trillion annually for ten years on transport facilities and education. The government should establish a National Infrastructure Bank to provide the finance by borrowing directly, attracting private-sector funds, or a mixture of the two. (I have proposed a similar institution in the United Kingdom.)